SBA DC Metro Area Small Business Update

SBA DC Metro Small Business Update

from your US Small Business Administration Washington Metro Area District Office

Greetings from the Director

I just wanted to take a few moments to wish you a happy and prosperous new year, and to keep you abreast of some important and exciting developments for our local business community.

From the very outset, 2013 has been a year of important change. The National Defense Authorization Act of 2013 removes the dollar amount caps that had previously restricted the size of contracts that could be set aside for Women-Owned Small Businesses (WOSBs), which in turn seriously limited the number of contracts eligible for the program. Removing this limitation should dramatically increase the contract available under the WOSB program. In addition, the law mandates SBA to conduct a new study to determine if a greater number of industries should be included in the set-aside program. In our area, where women business owners and government contracting are so very important to our prosperity, these changes should soon begin to reap dividends for our local economy.

In addition, 2013 will be the year that most businesses will begin implementing the changes called for in the Affordable Care Act, which will take full effect next year. There are many incentives available for small businesses to expand their health care offerings to employees, and we at SBA stand ready to help you navigate this process in the coming months. See below for information resources we've prepared to get you started.

I’d also like to encourage you to mark your calendars for 9:00-10:00 a.m. on the 4th Tuesday of each month, when your District Office will be presenting an ongoing series of small business seminars. We’ve had such a positive response from our recent educational events that we are setting aside time each month to bring you up to date information on the resources available to help your business reach its highest potential. We’re kicking off this February 26 with an introduction to the HUBZone contracting program. Subsequent months will tackle exporting, proposal writing, and other key business topics. We look forward to many interesting and productive mornings to come.

As we travel together through 2013, I hope you’ll remember that my staff and I at your Washington Metro Area District Office are here to help you start, build, and grow your business.

Happy New Year,

Bridget Bean, District Director

The Affordable Care Act: What it means for your small business

The U.S. Small Business Administration (SBA) has launched a new web page and blog dedicated to educating small business owners about the Patient Protection and Affordable Care Act (commonly known as the Affordable Care Act or ACA). Many provisions of the new law will take effect in the next year. These new tools will serve as a gateway for small business owners, connecting them with information provided by SBA’s federal partners responsible for implementing the law.

“The Affordable Care Act provides small business owners with access and opportunity to provide affordable health care options for their employees,” said SBA Administrator Karen G. Mills. “SBA’s new Affordable Care Act web page and blog will serve as a resource for small business owners who want learn more about how to take advantage of these benefits.”

The Affordable Care Act has many beneficial measures specifically for small businesses, including slowing premium cost growth and increased access to quality, affordable health insurance. SBA’s new web page at www.sba.gov/healthcare breaks down the key provisions of the Act based on business size in the following categories: self-employed, fewer than 25 employees, fewer than 50 employees and more than 50 employees.

The web page also provides links to other useful information for small businesses, including a glossary of key health care reform terms, an interactive timeline with dates for when certain reforms will be implemented, a state-by-state breakdown of health care options, and how to learn more about specific tax provisions and regulations. Additional resources will be added as they become available.

The blog, entitled Health Care Business Pulse (sign up at www.sba.gov/blog), will provide small business owners with continuous updates about the implementation of the Act. The blog is for informational purposes only and is not intended as legal or tax advice. Readers should consult their legal or tax professionals to discuss how specific matters relate to their individual business circumstances.

Ready for Tax Season? 6 Small Business Tax Prep Tips

by Natalia Olson-Urtecho, SBA Administrator, Region III

As you settle down after the busy holiday season, you will soon face another season – tax season! Small business owners need to understand how taxes may affect their business.

It is important to file properly, avoid audits and claim the right tax deductions, so here are six tips to help ease the burden of tax preparation and help you get ready for the April 15 deadline.

1.Keep Good Records:

Proper record-keeping year-round is the first step to ensuring your taxes are filed accurately and that you have the paperwork you need to back up your deduction claims just in case you’re audited.

2.Understand Your Deductions:

What small business deductions can you take? Do you have the documentation and original receipts to back them up? Remember, tax credits and deductions change each year.

3.Utilize the Small Business Jobs Act Tax Provisions:

The Small Business Jobs Act of 2010 President Obama signed into law has more than 17 tax provisions to decrease the tax burden for small businesses. Several of the law’s provisions may be taken advantage of during this year’s tax season to provide great savings for your business.

These tax credits will allow small businesses to cover up to 35 percent of the premiums a small business pays to cover its workers. In 2014, the rate will increase to 50 percent.

5.Avoid Common Audit Traps:

It is very important to be aware of potential red flags and act on them before the IRS does.

Classifying Employees as Independent Contractors – Independent contractors and employees are not the same and it's important to understand the difference. To the IRS, misclassification can be seen as an attempt to avoid payroll taxes and non-compliance can bring penalties and back taxes.

Home Office Deduction – This deduction is very specific and not all home-based businesses qualify. Likewise, if you run your business from a commercial location and claim the home office deduction, you might trigger some interest from the IRS. Know how to determine if you are eligible to claim it and what specific expenses you can write off.

Large Sum Miscellaneous Deductions – If you claim a large amount of itemized deductions relative to your income, the IRS may get suspicious. Likewise, if you bucket a large amount of miscellaneous expenses, you may raise eyebrows. Be specific and label every deduction.

6.Keep Business and Personal Expenses Separate:

The IRS scrutinizes personal expenses that may have been claimed as a business expense, such as the use of a business vehicle for personal use. Be diligent about keeping good records and maintain separate bank and credit card accounts for your business.

Under the National Defense Authorization Act of 2013 (NDAA) the SBA will make changes to its Women-Owned Small Business Federal Contract Program to help women-owned small businesses get more federal contracts and help the federal government meet and exceed its statutory five percent women’s contracting goal.

Prior to the new law, the anticipated award price of a contract for women-owned (WOSB) and economically disadvantaged women-owned small businesses (EDWOSB) could not exceed $6.5 million for manufacturing contracts and $4 million for all other contracts. The new law removes these thresholds for WOSBs and EDWOSBs allowing them greater access to federal contracting opportunities without limitations or restrictions to the value of a contract.

The NDAA also requires the SBA to conduct another study to identify and report industries underrepresented by women-owned small businesses. As a result, more eligible women-owned businesses may be able to participate in SBA’s Women’s Federal Contract Program and compete for and win federal contracts.

To be eligible for the program, you must meet the following criteria:

1. Your business must be 51 percent owned and controlled by one or more women, and primarily managed by one or more women.

The WOSB Program identifies eighty-three four-digit North American Industry Classification Systems (NAICS) codes where WOSBs are underrepresented or substantially underrepresented. Contracting officers may set aside contracts in these industries if the contract can be awarded at a fair and reasonable price and the contracting officer has a reasonable expectation that two or more WOSBs or EDWOSBs will submit offers for the contract.

Small Business Spotlight:

Becky’s Pet Care - A Tail of Success

Becky’s Pet Care, Inc. is a professional dog walking and pet sitting company serving the communities of Northern Virginia. The explosive growth in population in Northern Virginia has been accompanied by growth in the number of companion animals. This created a tremendous unmet demand among working professionals for pet care and a tremendous opportunity for someone ready to fulfill this role. In response to the growing need for professional pet sitting services in her community, President and Founder Becky O’Neil started a pet care company in 1998 in the basement of her townhouse.

Becky's Pet Care, Inc. now has commercial office space in two locations, has served over 3500 clients, and employs 90 bonded and insured pet care professionals and 7 full time administrative staff. As her business grew, Becky recognized the need to develop her expertise in small business ownership to include personnel management, systemization, marketing, business planning and development, and human resources.

The Community Business Partnership (CBP) is an initiative of the George Mason University School of Public Policy and the Mason Enterprise Center. The CBP facility in Springfield, Virginia brings a wide range of economic development services under one roof, including the Women’s Business Center (WBC) of Northern Virginia and the Small Business Development Center (SBDC). These SBA-sponsored resource partners were instrumental in helping Becky O’Neil begin and grow her business. She attended classes offered by the WBC and the SBDC, wrote her first business plan with their help, secured financing from a CBP affiliate, and met frequently with WBC and SBDC counselors as she grew her business and sharpened her management skills. “The Community Business Partnership has been the single most valuable recourse that I have found as a small business owner”, Becky said of her experiences.

Becky O’Neil is committed to helping other business owners find the help that was so important to her own development. She is a regular presenter at WBC and SBDC workshops. In January 2012 Becky was elected to serve on CBP’s Board of Directors.Becky’s Pet Care also works with and supports Northern Virginia charitable organizations and animal welfare groups.

SBA In the Community

On Thursday, January 24, Washington Metro Area District Director Bridget Bean greeted the attendees at the Greater McLean Chamber of Commerce Monthly Small Business Education Series in McLean, Virginia. The breakfast meeting featured a presentation by the Washington Business Journal on lead generation, followed by a networking breakfast.

Keep an eye out for Washington Metro Area District Office staff throughout our community, and be sure to say “Hi!”

Capital Closeup

SBA's Certified Development Company Lending Program (504 Loans) explained:

Created by Congress in Section 504 of the Small Business Investment Act of 1958, Certified Development Companies (CDCs) are private, not-for-profit institutions that are chartered to contribute to the economic development of its community or region. CDCs are certified and licensed by SBA, and work the agency and private-sector lenders to provide financing for small businesses for capital investment. There are over 260 CDCs nationwide each having a defined Area of Operations covering a specific geographic area. There are 5 CDCs which serve the Washington DC Metropolitan Area, including Northern Virginia.

An SBA 504 loan is a partnership between a Certified Development Company (CDC), the Small Business Administration and a lender.Working with a lender, the CDC provides up to 40% of the financing for commercial real estate purchase, new construction, or purchase of equipment.A lender partners with the CDC and typically provides 50% of the financing, while the entrepreneur ends up paying as little as 10% down. Under certain circumstances, the borrower’s contribution may be a few points higher but is always substantially less than would be the case without CDC financing.

The CDC works closely with the small business borrower to process, approve, close and service the SBA 504 loan.Funding is provided by the CDC issuing a 10- or 20-year debenture bond that is sold to investors on Wall Street giving entrepreneurs access to capital at low, fixed interest rates - usually only available to large corporations. Debenture bonds are especially attractive to investors since they are backed by the SBA and fully guaranteed by the U.S. Treasury.

When a business receives 504 financing, the required down-payment is dramatically reduced, the loan is secured at a below-market, fixed rate, at terms of up to 20 years, and the loan can be used to finance “soft costs” (such as design, appraisal, environmental, and closing costs) that in the case of a conventional loan the borrower would usually have to finance from cash on hand. As a result, business owners can keep a lot more cash on-hand for operating and building their businesses. Current rates for 504 loans are very low - 4.038% (fixed for 20 years) for debentures closing in January 2013 according to Business Finance Group, a CDC that serves the Washington Metropolitan Area.

Bridget Bean, SBA District Director for the Washington Metro Area, offers this assessment of the program, “The 504 lending program is a proven success. Best of all, it’s a win-win-win situation, a win for the small business, for the participating lender, and for Northern Virginia.” A National Economic Impact Study done by the National Association of Development Companies (NADCO) demonstrated that for every dollar invested in 504 loans through SBA participation, $94 in federal, state and local tax revenues are returned.

“In our area alone, 504 loans have supported more than $1.1 billion in investment over the past 4 fiscal years,” reports Bridget Bean. “This program is one of the most effective tools we have to develop our local economy by supporting the small businesses that make up the fabric of our communities.”

New DC Metro Monthly Seminar Series to Start Feb.26

Due to the overwhelming response to our 2011-2012 monthly contracting series, your SBA Washington Metro Area District Office will hold monthly seminars on federal contracting and other small business issues, starting February 2013. These talks will all be held at the District Office at 740 15th St. NW, on the 4th Tuesday of each month from 9:00-10:00 am (unless otherwise noted). These sessions will be free of charge but registration is required . For more information or to register, email wmadoee@sba.gov.

The first two sessions will be:

February 26, 2013:

Introduction to the Historically Underutilized Business Zone (HUBZone)Federal Contracting Program

March 26, 2013

A partnership for Small Business Exporting: services available through the US Export Assistance Center (USEAC) network

For more local learning and networking opportunities:

See the DC Metro Area small business events calendar at www.sba.gov/dc